To Coin a Solution

Over the years, The Simpsons have proposed many great ideas. Aqua-cars. Info-tainment. The Duff Bowl. But the TV show that was ahead of its time really jumped the gun with one particular idea.

Enter the $1 trillion coin.

Here’s the back-story: On The Simpsons, Homer’s evil boss Mr. Burns steals a $1 trillion bill that he was supposed to deliver to European governments after World War II. Today, to duck under the coming debt ceiling, some wanted our real-life government to do something similar.

The Treasury Department may have the legal power to strike coins in any denomination it chooses. Under that theory, it could have made one (or more) $1 trillion coins and deposited them at the Federal Reserve. The Fed would then pretend this was an actual deposit of $1 trillion, and the government would go on paying its bills.

Too cute by half.

Recall that, on the TV show, Mr. Burns’ brazen theft didn’t do him much good, since he couldn’t ever spend his $1 trillion bill. He ended up holding on to it for decades until it was stolen from him by a tin-pot dictator. Oddly, that’s actually the theory behind the $1 trillion coin as well. It wouldn’t circulate, but would merely sit in a vault at the Federal Reserve.

That makes sense. You couldn’t hope to actually spend this coin. Nobody except the Fed could hope to make change for it. One would need planeloads of $100 bills; where could you store them if you had them?

This highlights one of the country’s major problems. Our government owes 16 trillion dollars (and counting), and it’s impossible for a human to really comprehend that number. We understand that it’s big, but can’t wrap our heads around just how big.

Consider 1 million. It’s a large number, but we’re aware that there are millionaires out there. There are things, to coin a cliché, that we’ve seen “a million times.” A million is achievable.

As for a billion, that’s more difficult to imagine. These days there are people who’ve amassed billion-dollar fortunes. But they’re few and far between. To be more concrete, if you’re 31 years old, you’ve lived a billion seconds.

So let’s make the jump to a trillion. It can’t be that much more, right? One Web site claims that Bill Gates earns $20 million every day. So at that rate he must be closing in on a trillion by now, right? Not quite. A trillion equals a thousand billions, or a million millions. It’s more than anyone could earn.

Consider the jump from billion to trillion as time: Instead of 31 years worth of seconds it’s 31,688 years. “Western civilization has not been around a trillion seconds,” tysknews.com reports. “One trillion seconds ago -- 31,688 years -- Neanderthals stalked the plains of Europe.” Politicians love to talk in trillions, because they understand we’ll never be able to understand them.

There’s another problem. Yes, the government has the power to create bills and coins and call them money. It’s what’s called fiat currency. There hasn’t been anything tangible behind our money since we went off the gold standard. But the value in our cash doesn’t come from the fact that the government says it has value. Cash is only worth something because people believe it has value.

Money is very handy. It’s more convenient to swap cash for goods and services than it would be to trade, say, eggs. But if you have, say, a dozen eggs, you know you can eat them and you’ll be alive tomorrow. They have an actual, non-monetary value. You can’t eat a $1 trillion coin.

Fiat currencies fail when people lose faith in the government that issued them. People resorted to bartering -- trading goods and services -- throughout history, from the American Confederacy to the Weimar Republic and modern Zimbabwe.

The United States has been fortunate recently. Despite our massive debt, our money has remained the world’s default currency, because people have more faith in the U.S. dollar euro, yen or any other currency. A gimmick $1 trillion coin could only serve to erode that confidence.

Policymakers recently announced they won’t be making any $1 trillion coins. That’s a smart step. The next step is that Congress should start trimming spending. If we spend less, we won’t have to hit the debt ceiling. And investors would gain confidence that the U.S. government intends to keep its promises.